As new regulations and stricter platform privacy policies continue to be introduced, businesses will have to say farewell to personalized ads driven by third-party data and instead build direct relationships with their customers to drive authentic advocacy and evangelism.
Imagine you’re hosting a dinner party. There’s lots to prepare, but first you need to find out if your guests have any allergies. You have two options: snoop around asking their favorite restaurants and a bunch of local delivery drivers for intel... or just ask them directly. Which seems more polite?
In a social situation the answer seems obvious, but when it comes to digital advertising, what brands can do has long distracted them from what they should do.
For years, brands have gone with something closer to the first option, using third-party cookies to track users across the web before serving them personalized ads. Though cookies have played a role in advertising efficiency, they have also led to a steady decline in consumer trust. Now, consumers are rightly more privacy-conscious than ever.
But why snoop when you can simply ask? Today, major tech companies are starting to realize that this is the better option—and that when it comes to data, manners do still matter.
Last year, Google announced it would phase out third-party cookies in Chrome, following similar initiatives by Mozilla and Safari. Now, the latest in a string of privacy-forward updates comes from Apple as part of iOS 14, which includes a new App Tracking Transparency (ATT) mandate.
With this new policy, announced on Data Privacy Day, Apple developers must ask users if they want to opt into cross-app tracking, rather than making the decision on their behalf. This is a significant change. Cross-app tracking, the app companion to browser cookies, is what provides advertisers with the third-party data used to fuel ad targeting and personalization on mobile apps. It’s what means, if you browse for a product on your phone, it’ll follow you around every corner of the internet until you finally give in and buy it.
Though it helps mobile advertisers connect with you in a more reliable and tailored way, cross-app tracking often comes at the expense of your privacy—and that’s a challenge for brands. Given how privacy-conscious consumers have now become, it’s reasonable to expect a significant number of users to actively opt out of cross-app tracking when the ATT changes are rolled out.
That means there’s going to be a lot less third-party data flying about. For the digital advertising industry, which has relied on third-party data for years, this has the potential to be a huge problem.
So where does that leave brands? Way, way back in the 90s, that’s where. A simpler time, when most advertising was context-focused rather than personalized. A time when you could let someone borrow your laptop, safe in the knowledge that any ads they saw would match the sites they appeared on, rather than revealing your embarrassing online shopping habits because your browsing had been tracked across the web.
That’s actually not a bad thing. In fact, a return to a cookieless world presents advertisers with an opportunity - a chance to rebuild consumer trust using first-party data.
And trust is good business. Without it, customer relationships just don’t last—and if 2020 taught brands anything, it’s just how important it is to hold onto existing customers in an ever more challenging market.
Rather than sniffing around for information and eroding trust in the process, the imperative is now on brands to go directly to the source: the consumer.
First-party data is the only way forward, and direct data ownership will be key to survival.
The good news for advertisers is that they’re not literally being thrown back to the 90s.
Today, brands can turn to their first-party data—information about their own interactions with their own customers—to understand more about their customers. And in today’s digital world, that’s hardly a scarce resource. In fact, there are now so many digital interactions between brands and their customers that their first-party data is rich, reliable, and incredibly powerful. It can drive advanced analytics, fuel a deep understanding of customers and their needs, and can be used to drive intelligent, personalized ad campaigns that don’t rely on unwanted tracking. Put simply, it’s a far superior asset.
First-party data will soon be the only way to fuel digital advertising for a privacy-conscious world. We’ve already seen this model in action: just think of Amazon and Netflix, and their ability to precisely tailor users’ experiences based on their past behaviors. Those businesses, and all the incredible personalization they’re able to deliver, are powered by first-party data.
Sheer expense and technical complexity meant we didn’t historically see this adopted more widely, but that’s now changed and new, affordable data platforms mean companies of all sizes are able to realize the potential of their own first-party data.
Though more companies are taking their lead, we’re not quite there yet. Changes like Apple’s ATT mandate are forcing brands in the right direction, but until policies change across the board, some will continue to hold onto the promise of third-party data because no other option seems viable.
But an alternative does exist in the form of first-party data, and to help brands see that, more companies need to speak out about their decision to ditch third-party data, sharing examples of their successes and inspiring others to do the same.
If that’s not an incentive, customer opinion certainly will be. After all, whose dinner party would you rather go to? The host that snuck up to your house last night and rifled through your trash for evidence of peanut allergies, or the one that just… asked you about them?
Peter Reinhardt is CEO and co-founder of Twilio Segment, the leading Customer Data Platform. Founded in 2011, over 20,000 businesses like Fox, Intuit, Atlassian, and Levis use Segment to collect, clean, and manage their customer data.